James Tobin (March 5, 1918 – March 11, 2002) was an American economist. Tobin advocated and developed the ideas of Keynesian economics. He believed that governments should intervene in the economy in order to stabilize output and avoid recessions. His academic work included pioneering contributions to the study of investment, monetary and fiscal policy and financial markets. Furthermore, he proposed an econometric model for censored endogenous variables, the well known "Tobit model."

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Outside of academia, Tobin became widely known for his suggestion of a tax on foreign exchange transactions, now known as the "Tobin tax." This was designed to reduce speculation on currency markets, which he saw as unproductive. He also suggested that the proceeds of the tax could be used to fund projects for the benefit of Third World countries, to help care for the environment or to support the United Nations. If used for the latter, it would supply the U.N. with a source of funding independent of its members, perhaps thereby empowering the international body to take initiatives for which member states, driven by self-interest, are unprepared to pay. His interest in economics, then, had a pragmatic and humanitarian aspect and was not restricted to theory or to promoting the interests of an elite. In 1972, he was an adviser to the Democratic U.S. Presidential candidate, George McGovern. He discouraged government intervention on behalf of either less advantaged or of the advantaged, however, when he considered that these were unfair, believing that market-forces could make necessary adjustments.

Biography

Early life

James Tobin[1] was born on March 5, 1918, in Champaign, Illinois. His parents were Louis Michael Tobin, a journalist working at the University of Illinois at Urbana-Champaign, and Margaret Edgerton Tobin, a social worker. Tobin followed primary school at the University Laboratory High School of Urbana, Illinois, a laboratory school in the university's campus.

In 1935, following his father's advice, Tobin sited through the entrance exams for Harvard University. Despite doing no special preparation before the exams, he passed and was admitted with a national scholarship from the university. During his studies he first read Keynes' General Theory of Employment, Interest and Money, published in 1936. Tobin graduated summa cum laude in 1939 with a thesis centered on a critical analysis of Keynes' mechanism for introducing equilibrium "involuntary" unemployment. His first published article, in 1941 (see Selected publications), was based on this senior's thesis.[2]

Tobin immediately started graduate studies, also at Harvard, earning his M.A. degree in 1940. Here he had among his professors Joseph Schumpeter, Alvin Hansen, Gottfried Haberler and Wassily Leontief, while the graduate students included Paul Samuelson, Lloyd Metzler, John Kenneth Galbraith, Abram Bergson, Richard Musgrave and Richard Goodwin. In 1941, he interrupted graduate studies to work for the Office of Price Administration and Civilian Supply and the War Production Board in Washington, D.C.. The next year, after the United States entered World War II, he enrolled in the US Navy, spending the war as an officer on a destroyer. At the end of the war he returned to Harvard and resumed studies, receiving his Ph.D. in 1947 with a thesis on the consumption function written under the supervision of Joseph Schumpeter.[3] In 1947 Tobin was elected a Junior Fellow of Harvard's Society of Fellows, which allowed him the freedom and funding to spend the next three years studying and doing research.

Academic activity and consultancy

In 1950 Tobin moved to Yale University, where he remained for the rest of his career. He joined the Cowles Foundation, which moved to Yale in 1955, also serving as its president between 1955-1961 and 1964-1965. His main research interest was to provide microfoundations to Keynesian economics, with a special focus on monetary economics. In 1957 he was appointed Sterling Professor at Yale.

Besides teaching and research, Tobin was also strongly involved in the public life, writing on current economic issues and serving as an economic expert and policy consultant. During 1961-62, he served as a member of John F. Kennedy's Council of Economic Advisors, under the chairman Walter Heller, then acted as a consultant between 1962-68. Here, in close collaboration with Arthur Okun, Robert Solow and Kenneth Arrow, he helped design the Keynesian economic policy implemented by the Kennedy administration. Tobin also served for several terms as a member of the Board of Governors of Federal Reserve System Academic Consultants and as a consultant of the US Treasury Department.[4]

Tobin was awarded the John Bates Clark Medal in 1955 and, in 1981, the Nobel Memorial Prize in Economics. He was a fellow of several professional associations, holding the position of president of the American Economic Association in 1971.

In 1988 Tobin formally retired from Yale, but continued to deliver some lectures as Professor Emeritus and continued to write. He died on March 11, 2002, in New Haven, Connecticut.

Tobin was a trustee of the Economists for Peace and Security.

Personal life

James Tobin married on September 14, 1946, with Elizabeth Fay Ringo, a former M.I.T. student of Paul Samuelson. They had four children: Margaret Ringo (born in 1948), Louis Michael (born in 1951), Hugh Ringo (born in 1953) and Roger Gill (born in 1956).[4]

Legacy

Presenting Tolbin with his Nobel Prize, Professor Assar Lindbeck summed up the significance of his work, and thus of his legacy, when he said:

Professor Tobin:

You have laid a solid, and empirically applicable, foundation for studies of the functioning of monetary and financial markets, and you have also shown how changes in these markets influence the magnitudes of consumption, investment, production, employment and economic growth.

Your achievements are characterized by a rare combination of keen insight, analytical skill and a good common sense for practically relevant problems. Your scientific contribution is well anchored in the tradition of central economic theory, and your originality is a natural part of the continuous long-term accumulation of basic scientific knowledge in economics.[5]

Tobin, James, and William C. Brainard. "Asset Markets and the Cost of Capital." In Economic Progress: Private Values and Public Policy (Essays in Honor of William Fellner), edited by Richard Nelson and Bela Balassa, 235-62. Amsterdam: North-Holland, 1977. ISBN 9780720405156

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